They Do Things Differently in the USA

Former Autonomy CFO Sushovan Hussain has been found guilty of 16 counts of fraud in a Federal Court in California. He was convicted on all 16 counts of wire and securities fraud. This case was based on allegations of false accounting to ramp up the value of the Autonomy business prior to its acquisition by Hewlett-Packard. The latter subsequently wrote down most of the $10.3 billion cost of that acquisition.

Although Autonomy was a UK public company, and the Serious Fraud Office did look at the case they decided to do nothing. However a civil action against Mr Hussain and the former Autonomy CEO, Mike Lynch (who was not indicted in the US case), is still being pursued in the English courts. This decision will clearly strengthen that action.

The US prosecutor suggested in court that the accounts were a façade and eventually proved to be an “unsustainable Ponzi scheme”. Mr Hussain is apparently likely to appeal the verdict, but he faces a prison sentence of up to 20 years – sentencing will take place on Friday.

How different to the UK where prosecutions for fraud based on false accounting almost never take place. Questions were raised about the accounts of Autonomy by investors and a whistle blower also raised issues before the sale to H/P but the UK authorities did nothing. The FRC did announce an investigation into the accounts of Autonomy in 2013. It is still listed as a “current” case on their web site, i.e. no report and no conclusions as yet. Why the delay?

This case demonstrates the typical sloth and inaction of the UK regulatory authorities in comparison with the USA. The FCA/FRC are both very ineffective, and the recent events regarding the Aviva preference shares and the collapse of Beaufort show how ineffective those bodies are in protecting the interests of investors. It’s a combination of a defective legal system and a culture of inaction and delay that permeates these organisations. Well at least that is my personal view.

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